United States v. Holmes ( 1999 )

Opinions of the United
1999 Decisions States Court of Appeals
for the Third Circuit
9-29-1999
United States v. Holmes
Precedential or Non-Precedential:
Docket 98-1703
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Recommended Citation
"United States v. Holmes" (1999). 1999 Decisions. Paper 267.
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Filed September 29, 1999
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 98-1703
UNITED STATES OF AMERICA
v.
DANIEL G. HOLMES,
Appellant
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 97-cr-00424-1)
District Judge: Hon. Robert F. Kelly
Submitted Under Third Circuit LAR 34.1(a)
September 7, 1999
Before: SLOVITER and ROTH, Circuit Judges,
and POGUE, Judge United States Court of
International Trade*
(Filed September 29, 1999)
Regina M. Coyne
David L. McColgin
Maureen Kearney Rowley
Defender Association of Philadelphia
Federal Court Division
Philadelphia, PA 19106
Attorneys for Appellant
_________________________________________________________________
*Hon. Donald C. Pogue sitting by designation.
Thomas M. Gallagher
Michael R. Stiles
Walter S. Batty, Jr.
Office of United States Attorney
Philadelphia, PA 19106
Attorney for Appellee
OPINION OF THE COURT
SLOVITER, Circuit Judge.
Appellant Daniel Holmes, a disbarred attorney and
accountant, appeals from the sentence imposed by the
District Court following his plea of guilty to two
indictments. One indictment charged Holmes with
conspiracy; bank, wire, and mail fraud; interstate
transportation of stolen property; income tax fraud; and
forgery. The other charged him with forgery of two federal
judges' signatures. The District Court sentenced Holmes to
96 months in prison, ordered him to pay restitution in the
amount of $1,899,838.80, and imposed a special
assessment of $8,650.00.
Holmes appeals his sentence, challenging the District
Court's upward departure from the sentencing guidelines
by two levels for extraordinary abuse of a position of trust,
the court's imposition of restitution without formally
determining his ability to pay, and the court's calculation of
the amount of the special assessment.
I.
We review the underlying facts briefly as they give some
indication of the nature and extent of the schemes Holmes
devised between 1994 and 1996 to defraud his clients and
acquaintances.
In October of 1994, one of Holmes' clients was involved
in a protracted business dispute. In anticipation of
litigation, Holmes asked his client to deposit money in an
escrow account under Holmes' name while the matter was
being resolved. Holmes then prepared a fabricated
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settlement agreement for a non-existent lawsuit and forged
the opposing party's signature. In connection with this
scheme, Holmes produced what he represented to be court
orders to which he forged the signatures first of United
States District Judge James Giles and later of United States
District Judge Norma L. Shapiro. Thereafter, Holmes
withdrew money from the escrow account that his client
had funded and forwarded that money to his client as the
purported settlement. To distract the client's requests for
the additional funds he was to receive under the
"settlement," Holmes invented more lies.
Also in October of 1994, Holmes, presented with several
bonds belonging to the aunt and uncle of his neighbor,
forged the signature of his neighbor's dying uncle without
the neighbor's knowledge, had a friend notarize the
signature, redeemed the bonds, and deposited the money,
totaling over $150,000, in his own account.
In January of 1995, Holmes created a fraudulent low-
income housing investment venture and fabricated
documents that attested to the viability and soundness of
the prospect. Eleven investors made checks payable to an
account held by Holmes. After making one quarterly
payment to his investors, Holmes admitted that he had
spent all of the investors' money.
Shortly thereafter, Holmes defrauded a client who had
come to him with a tax problem by eliciting money from the
client for a contrived settlement with the federal
government. Holmes then used the "settlement" money for
his own gain. He elicited additional money from the same
client for a non-existent state tax liability, and then again
for an investment scheme.
In another scheme in 1995, Holmes persuaded two
clients who were finally in a position to satisfy their
outstanding federal tax obligations to write checks which he
undertook to use to pay off taxes owed but which he
instead placed straight into his bank account. Although he
eventually returned the money, he failed to satisfy his
clients' outstanding tax obligations as promised. In yet
another tax scheme, Holmes took advantage of two clients
for whom he had been filing business tax returns for years
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by selling them fictitious tax credits and claiming non-
existent low-income housing tax credits on their tax
returns.
Further, in early 1996 Holmes, acting in conspiracy with
two of the three cousins of a man who died intestate,
prepared a false will naming one of the cousins as the
executor and naming the two cousins as the sole
beneficiaries of the estate. Holmes forged the signature of
the deceased testator and, acting with the two cousins,
established an estate account from which all three drew for
their personal benefit.
In addition, Holmes engaged in money laundering.
Between February and June of 1996, he withdrew money
from the account established in the fake will scheme and
purchased cashier's checks from Mellon Bank in an
attempt to conceal the origin of the money. Thereafter, he
used the cashier checks to pay off victims of his other
schemes and to make purchases for his general benefit.
Eventually, all of the above-mentioned schemes were
discovered and Holmes was charged in two indictments.
Holmes pled guilty pursuant to a plea agreement in
exchange for the dismissal of 114 counts from one
indictment. His sentence was calculated under the
Sentencing Guidelines. He was sentenced for fraud
pursuant to U.S.S.G. S 2F1.1, which has a base offense
level of 6, to which there were enhancements of twelve
levels for the amount of loss, U.S.S.G. S 2F1.1 (b)(1)(M); two
levels for more than minimal planning, U.S.S.G.S 2F1.1
(b)(2)(A); two levels for vulnerable victim, U.S.S.G. S 3A1.1;
four levels for aggravating role, U.S.S.G. S 3B1.1(a); and two
levels for abuse of a position of trust or use of a special
skill, U.S.S.G. S 3B1.3. At the request of the government,
the District Court departed upwards two additional levels
pursuant to S 5K2.0 based on Holmes' extraordinary abuse
of a position of trust because the court believed the two-
level enhancement for abuse of a position of trust was
insufficient.
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II.
A.
Holmes asserts that the District Court erred in granting
an upward departure for extraordinary abuse of trust. He
argues that there was nothing extraordinary about his
situation that warranted the upward departure, and
contends that the other level enhancements included in his
sentence accounted for any egregious actions on his part so
that the two-level upward departure was in effect double
counting.
In determining the appropriateness of an upward
departure, we must first determine "whether a factor is a
permissible basis for departure under any circumstances,"
or, in other words, we must decide as a matter of law if
departure was warranted. Koon v. United States , 518 U.S.
81, 100 (1996). This phase of the review is plenary. United
States v. Kikumura, 918 F.2d 1084, 1098 (3d Cir. 1990). If
it is established that an upward departure is appropriate,
we must then determine whether the degree of the
departure was reasonable. Id.Under U.S.S.G. S 5K2.0, a district court may either
increase or decrease the offense level if it believes that the
level contemplated by the sentencing guideline does not
accurately reflect the nature of the case. U.S.S.G. S 5K2.0;
United States v. Corrigan, 128 F.3d 330, 333 (6th Cir.
1997). Grounds for departure include the finding of an
aggravating circumstance not contemplated by the
Commission or, if contemplated, the presence of a factor
that far exceeds the expectation of the commissioners.
U.S.S.G. S 5K2.0; United States v. Ventura, 146 F.3d 91, 97
(2d Cir. 1998). Also, if a factor is not normally part of the
equation in sentencing outside the guideline range, but is
present in an unusual degree and distinguishes a case from
the heartland of cases covered by the guidelines, departure
is appropriate. U.S.S.G. S 5K2.0. Finally, the commentary to
S 5K2.0 suggests that a court may be presented with a case
where none of the characteristics or circumstances
individually distinguish the case from the heartland cases,
yet the court may find that a combination of the
characteristics and circumstances make it extraordinary.
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Holmes argues that his activities in this case were
precisely of the kind envisioned by the sentencing
guidelines, and therefore could not be the subject of a
departure. The guideline for abuse of a position of trust,
S 3B1.3, provides that "[i]f the defendant abused a position
of public or private trust, or used a special skill, in a
manner that significantly facilitated the commission or
concealment of the offense," the court should increase the
sentence by two levels. Holmes refers to our opinion in
United States v. Copple, 24 F.3d 535, 548 (3d Cir. 1994),
where we held that a scheme involving thirty-one victims
and millions of dollars of stolen money was not outside the
heartland of fraud cases. Id. at 548. Copple is not
analogous to the situation here because the defendant
there was not charged with abuse. Rather, the District
Court in Copple upwardly departed based on the number of
victims and the amount of monetary loss involved. Id. at
547.
Holmes also refers to United States v. Bennett , 161 F.3d
171 (3d Cir. 1998), where the district court imposed a two-
level enhancement for abuse of trust but did not upwardly
depart for the same offense even though the scheme in that
case was extensive. In Bennett, however, the prosecution
did not ask for an upward departure, so the court had no
opportunity to review whether the abuse of trust in that
case fell outside the heartland. See id. at 195-96.
The District Court in this case explained its reasons for
the upward departure as follows:
I am of the view that the two point enhancement for
abuse of position of trust under 3B1.3 is inadequate to
reflect the widespread fraud and criminal activity in
this case. The act of signing a judge's signature, the act
of preparing a will and forging it after a decedent has
died and all of the other various acts of a violation of
trust to the various victims, some as attorney, some as
accountant, I find are extraordinary.
App. at 72. The court later added:
A case like this, you don't really grasp the case
because it's just figures and documents, but if you
read the victim impact statements, it comes alive and
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there are people who will be suffering from this for the
rest of their lives because it has affected their
retirement income in some cases, it has affected their
expectations in others.
App. at 87.
Holmes perpetuated various and distinct schemes, all
involving abuse of positions of trust. He prepared legal
documents out of whole cloth, and then forged the
signature of two federal judges. He defrauded clients, next
door neighbors, and investors. His activities were
successful in eight separate schemes because of the
positions of trust he held. We see nothing in the
background and commentary sections that accompany the
abuse-of-trust guideline that suggests the Sentencing
Commission envisioned multiple acts of abuse of trust to
the degree that was present in this case. Cf. Ventura, 146
F.3d at 97 ("[T]he language of the guideline and
commentary suggest that the rule was drafted without
consideration that the defendant might engage in multiple
episodes of obstructive conduct."). Accordingly, we agree
with the District Court that the type and extent of Holmes'
activities are beyond our experience and are not of the kind
envisioned by the guideline for abuse of a position of trust.
Holmes next contends that the departure is not justified
because the factors not sufficiently accounted for under the
abuse-of-trust provision are accounted for elsewhere in the
adjustments that were made. First, he argues that the
twelve-level enhancement he received for the amount of loss
under U.S.S.G. S 2F1.1(b)(1)(M) considers the same factors
on which the District Court based its decision to upwardly
depart. He points us to the District Court's statement that
the motion for upward departure was granted because"the
two-point enhancement for abuse of a position of trust
under 3B1.3 is inadequate to reflect the widespread fraud
and criminal activity in this case." Contrary to Holmes'
assertion, however, the District Court's statement focuses
on the impact and suffering caused by Holmes' deceptions
and the breadth and manner in which Holmes carried out
his endeavors while in a position of trust, rather than on
the number of people affected or the amount of economic
loss incurred.
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Nor does the two-level enhancement Holmes received for
"more than minimal planning," U.S.S.G. S 2F1.1(b)(2)(A),
account for his extraordinary abuse of trust. We have
stated that "[w]hether a defendant's crime involved ``more
than minimal planning' considers the deliberative aspects
of a defendant's conduct and criminal scheme, and does
not necessarily include consideration of the defendant's
position of trust, if any." United States v. Georgiadis, 933
F.2d 1219, 1226 (3d Cir. 1991). If, as Georgiadis clearly
indicates, adjustments for more than minimal planning and
abuse of a position of trust do not amount to double
counting, it follows that a departure based on extraordinary
abuse of trust does not doubly count factors considered in
an adjustment for more than minimal planning. Similarly,
Holmes' increase under U.S.S.G. S 3A1.1 for a vulnerable
victim does not speak to the manner and extent to which
he defrauded those victims, and the four-level increase
Holmes received for an "aggravating role" under U.S.S.G.
S 3B1.1(a) reflects his leadership role in his extensive
criminal activities rather than the egregious manner in
which he abused his position of trust.
Finally, the government did not move for departure solely
on the fact that Holmes possessed a special skill as an
attorney, as Holmes suggests. Instead, the government
merely emphasized the fact that Holmes was in a position
of trust because he had the special skills that made others
confident in his abilities. U.S.S.G. S 3B1.3 (abuse of trust)
does not prohibit an enhancement under S 3B1.1
(aggravating role) if both prongs of U.S.S.G. S 3B1.3 are
violated. Accordingly, we conclude that the District Court's
decision to upwardly depart for extraordinary abuse of trust
was not made on a legally impermissible basis.
Having reached that conclusion, it requires considerably
less discussion to affirm the reasonableness of the degree of
departure. In Koon, the Supreme Court advised that on this
issue we must allow the district courts considerable
discretion to determine the degree to which a departure is
warranted. 518 U.S. at 100. The departure of an additional
two levels for abuse of a position of trust under the
circumstances of this case was reasonable. We therefore
hold that the two-level upward departure was within the
District Court's discretion.
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B.
Holmes challenges the Order requiring him to pay
restitution in the amount of $1,899,784.80 for all the
offenses he committed between 1994 and 1996. Our review
of this legal issue is plenary. Holmes contends that under
the Victim and Witness Protection Act (VWPA), 18 U.S.C.
S 3664, the statute applicable to all offenses occurring prior
to April 24, 1996, the district courts were required to make
a determination of the defendant's ability to pay before
imposing restitution. In this case, all but one of Holmes'
schemes took place prior to April 24, 1996. The government
agrees with the need for a remand. It reads the District
Court's order as properly ordering $1,320,872.59 in
restitution under the Mandatory Victim Restitution Act
(MVRA) for the fake will scheme, but concedes that the
court ordered restitution in the amount of $578,912.30
under the VWPA.
According to the VWPA, the court must "consider the
financial resources of the defendant, the financial needs
and earning ability of the defendant . . . and other such
factors the court deems appropriate." 18 U.S.C.S 3663(a).
We have asked the district courts to " ``make specific
findings as to the factual issues that are relevant to the
application of the restitution provisions of the VWPA.' "
United States v. Logar, 975 F.2d 958, 961 (3d Cir. 1992)
(quoting United States v. Palma, 760 F.2d 475, 480 (3d Cir.
1985)). Because the District Court did not undertake the
factual inquiry that is required of it before determining the
amount of restitution Holmes should pay for all the
offenses falling under the purview of the VWPA, we are
obliged to vacate the restitution order and remand the case
so that the necessary factual findings may be made
concerning Holmes' ability to pay.
C.
Holmes also argues that the District Court erred in
imposing the special assessment of $8,650. Holmes failed
to object to the special assessment and thus we review for
plain error.
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As Holmes notes correctly, the special assessment was
based on 165 counts from the two indictments. However,
on July 31, 1998, the District Court dismissed 114 of the
165 counts pursuant to the government's request.
Therefore, the assessment should have been based on 51
counts, the number of counts left after the dismissal.
Holmes argues the correct total should be $2,950, which he
computes as $50 per count for the 43 counts on offenses
occurring prior to April 24, 1996, and $100 per count for
the 8 counts on offenses occurring after April 24, 1996. The
government agrees that we must remand for this purpose.
On remand, the District Court will have the opportunity to
impose the correct total special assessment.
III.
For the reasons set forth, we will affirm the judgment of
conviction and the portion of the sentence that sets the
term of imprisonment. We will vacate so much of the
sentence as imposes the order of restitution and the special
assessment and remand for further proceedings.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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